A survey of the Midwest economy indicated continued growth in June but, for the second straight month, at a slower pace, with international trade and inflation pressures declining.
The Midwest Business Conditions Index, based on a survey of purchasing managers in nine states, was 57.2 on a 100-point scale, with scores over 50 indicating economic growth. The index was 60 in April and 57.6 in May.
Creighton University economist Ernie Goss, who oversees the monthly survey, said demand for U.S. exports has slowed because of global economic problems and because a stronger dollar makes U.S. goods less competitively priced.
Continued reduction of exports would be "a significant problem if this trend continues," he said. "On the other hand, the stronger dollar and somewhat slower regional growth have pushed import growth lower. I expect weak trade numbers in the months ahead for the nine-state region."
The survey's trade index was 48.4 in June, down from 55.1 in May and the lowest since August 2009. The June import index was 51.5, down from 57.1 in May.
Goss said farm income is strong and growing but at a slower pace. The survey's confidence index, looking ahead six months, was 56.7, up from 55.8 in May.
Weak prices for commodities such as gasoline are contributing to the low inflation risk, he said. The survey's wholesale price index was 51.1, down from 59.9 in May and 67.8 in April. Goss said the survey's June inflation score was the lowest since May 2009, during the Great Recession.
"The degree to which inflationary pressures have cooled has surprised me," he said, and indicates that the Federal Reserve can be more aggressive in stimulating the U.S. economy without worry about inflation. But he said there is little the central bank can do because interest rates are low and the national election is near.
"The last thing the Fed wishes to do is enter the political fray by abruptly changing policy," he said.
The survey's employment index was 61.8 in June, up slightly from 61.2 in May. Goss said the region continues to outperform the national average in job growth, accounting for 15 percent of U.S. job growth but 10 percent of the nation's employment.
Goss said he expects continued job growth in the region for the rest this year but less than in the first half of 2012.
Nebraska's index indicated growth for the 20th straight month at 54.5 for June, up from 53.6 in May. Iowa's index indicated growth for the 30th straight month, rising to 68 from 67.1 in May. Job growth was high in both states, Goss said, in part because of agriculture-related exports.
The survey also covers Arkansas, Kansas, Minnesota, Missouri, North Dakota, Oklahoma and South Dakota.
Other June results, compared with May, were new orders, 57.3 and 57.2; production or sales, 56.7 and 61.9; inventories, 53.9, 55.3; and delivery lead time, 56.2 and 52.7.
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